How much will oil cost in 2024: Russia’s role will change

Factors that will affect the price of a barrel in the coming months are named

One of the main economic intrigues of 2024: how the price of oil will change. The forecasts of various international analytical centers on this matter differ diametrically, and the arguments for both a possible sharp rise in the price of a barrel and for its equally sharp collapse are very serious. So far, the price of Brent has remained around $80 per barrel, while Russian grades of “black gold” continue to be exported at approximately the same price. However, almost every day new factors appear that can seriously shake the market: the conflict in the Middle East; Houthi attacks; weak demand for energy resources in Asia; growth in US production; doubts about the reduction in OPEC+ exports… What will happen to oil prices in the near future and how will their changes affect the Russian economy and our budget? MK discussed these issues with experts – economists and financial analysts.

Andrey LOBODA, economist, director of communications at BitRiver:

“In the coming year, the cost of “black gold” on world trading floors, as before, will be determined by the relationship between supply and demand. Demand is likely to remain high. As the International Energy Agency predicts, China will remain the largest importer of “black gold” in 2024 (and in the next few years). It is obvious that oil and its refined products will be in steady demand, since the Celestial Empire consumes huge volumes of hydrocarbons.

However, the largest producers of energy resources from OPEC+ should not relax: the supply of raw materials from countries competing with members of the alliance is increasing before our eyes. First of all, we are talking about record production levels in the United States. Major agreements are also being concluded with Brazilian companies, which rank eighth in the world in terms of production volumes, ahead of Canada, Venezuela and Iran. To support prices in January 2024, OPEC+ participants will respond by cutting production by 900 thousand barrels per day.

The oil market will depend on OPEC+ decisions and US actions. US purchases of hydrocarbons to replenish its strategic reserve may increase oil prices, but this trend will be hampered by the growth in production of shale energy resources by American holdings.

Monthly reports published by OPEC and the IEA may cause short-term market volatility. In 2024, Brent may be in the range of $75-95 per barrel, and Urals can be traded in the range of $70-90. This is noticeably higher than the $70 budgeted by the Russian Ministry of Finance for this year. The share of purchases from Asia will grow with a mirror reduction in oil supplies to the EU against the background of the deindustrialization of Europe due to its geo-economic confrontation with Russia. The growth in exports of OPEC participants will periodically lower the price towards $70. It is unlikely that it will be possible to restore the volumes of foreign oil purchases from two years ago in 2024, but the volume of export revenues of domestic companies will continue to grow due to the favorable price environment. The share of the Russian oil and gas complex will be about 50% of total export revenues.”

Vladimir CHERNOV, analyst at Freedom Finance Global:

“The next meeting of OPEC+ participants will take place on June 1. Before this date, the alliance can gather only in an emergency, if any need arises. So far, Brent is trading close to $80 per barrel, so there is no need for an urgent meeting. On January 1, OPEC+ countries began to further reduce oil production levels, although in practice this fact has not yet been reflected in the balance of supply and demand on the world market. This circumstance will not have time to seriously affect the global trade market within a month, but on the horizon of 3-6 months the effect will definitely appear: the cost of raw materials can fall to minimum levels or rise to sky-high limits.

In the next few months, the pace of recovery of the Chinese economy will influence the global oil market. The Celestial Empire is the world’s largest importer of “black gold” and the demand for petroleum products in this Asian state will significantly affect the global energy resource situation as a whole. Next week, January 17, GDP data for the fourth quarter and statistics on industrial production volumes in December 2023 in China will be published. These two indicators, more than others, will determine the demand for oil and fuel. Their simultaneous publication can greatly affect global commodity prices.

OPEC+ countries are interested in stabilizing world oil prices and, if necessary, will further reduce quotas for the production of “black gold.” As a result, in 2024 the average price of Brent will be quoted near the current level. Domestic exporters managed to reduce the discount on the Russian export Urals grade to the reference Brent grade (despite G7 sanctions) by more than half – from 34% to 16%. Subsequently, discounts will decrease much more slowly and more difficultly: with average world Brent prices of $80 per barrel, the “barrel” of Russian Urals will trade at $68.”

Artem DEEV, head of the analytical department at AMarkets:

“The Russian oil export grade Urals has increased in price and is now trading at almost $70 per barrel. However, in the first half of 2024 the picture may change significantly. The market is now marked by weakening demand for oil in the Asia-Pacific region, and the United States is trying to fend off export cuts by OPEC+ countries by increasing its own production. The situation in the conflict zone in the Middle East, of course, adds tension. Russian analysts expect oil prices to decline by 20%. Western experts have a similar opinion, although they are not so radical: previously their forecasts for the price of Brent in 2024 converged at $90, but now price expectations have dropped to $80. The easing of American sanctions against Venezuela and Iran, which have increased oil exports, is having an impact. At the same time, the cost of Russian raw materials reaches the price “ceiling” established by the G7, so even with a fall in world prices, Russia still has a chance to increase oil and gas budget revenues.”